1. Field of the Invention
The present invention relates generally to financial institution document processing. More specifically, the invention relates to a non-centralized, or decentralized, system and method that facilitates the capture, processing and archiving of checks and related financial institution document information at a remote merchant site, and enables direct transmission of the information to a U.S. Federal Reserve Bank, circumventing intermediate transmission to the Bank of First Deposit, all in compliance with the Check Clearing for the 21st Century Act.
2. Description of the Prior Art
The Check Clearing for the 21st Century Act, commonly referred to as “Check 21,” was signed into law on Oct. 28, 2003, and became effective on Oct. 28, 2004. Check 21 was designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a “substitute check,” which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check.
Check 21 has clearly made check processing more efficient. Instead of physically moving paper checks from one bank to another, Check 21 has allowed banks to process more checks electronically. Banks capture a picture of the front and back of the check along with the associated payment information and transmit this information electronically. If a receiving bank or its customer requires a paper check, the bank can use the electronic picture and payment information to create a paper substitute check. This process was created to enable banks to reduce the cost of physically handling and transporting original paper checks, which can be very expensive. Substitute checks are a paper copy of the front and back of the original check, which is printed in accordance with very specific standards so that the substitute check can be used in the same way as the original check.
While Check 21 has improved the efficiency of check processing, providing some additional level of convenience for banks and their customers, it has not translated into drastic financial savings for bank customers.
Systems and methods for the centralized high-speed processing of documents, such as bank checks, including high speed capturing, processing, transmission and storage, of video image data from the documents, is well known in the prior art. For example, U.S. Pat. Nos. 4,888,812 (to Dinan et al.) and 6,644,546 (to George et al.), both assigned to International Business Machines (IBM) of Armonk, N.Y., clearly describe such systems and methods. U.S. Pat. Nos. 5,862,321 (to Lamming et al.) and 6,144,997 (to Lamming et al.), both assigned to Xerox Corporation of Stamford, Conn., provide further examples of existing centralized systems and methods for accessing and distributing electronic documents.
Technology for check image capturing, performing optical character recognition (OCR) and image assessment, is well known in the art. For example, U.S. Pat. Nos. 5,097,517; 5,208,869; 5,444,794; 5,602,936; and 6,408,094 clearly describe such technology. This technology is conventionally used, for example, to process bank checks having Magnetic Ink Character Recognition (MICR) numbers. A magnetic ink reader is used with an MICR number that appears at the bottom of a bank check, bank draft, or bank deposit slip in order to establish and individual bank, account number, check number and a check or deposit slip amount. Furthermore, U.S. Patent Publication Nos. 2005/0144131 and 2005/0252960 describe associated centralized methods for electronically transmitting checks between financial institutions, such as between an Originating Depository Financial Institution (ODFI) and a Receiving Banking Financial Institution (RDFI).
Existing Check 21 solutions take advantage of the combination of prior scanning, imaging, processing and centralized electronic transmission technologies, in conjunction with Check 21 laws, to deliver Check 21 compliant data from remote merchant sites to the merchant's bank, or the Bank of First Deposit (BOFD), where the checks are processed as if physically delivered to the bank. However, applicants are unaware of any such system or method which enables the business merchants to locally capture and process Check 21 compliant data, for subsequent transmission to the Federal Reserve Bank, from a remote merchant site, bypassing the BOFD's operations, yet still providing archival and compliance information to the BOFD.
Accordingly, what is needed is a system and method that enables merchants to process batches of checks locally, for direct transmission (i.e., bypassing the Bank of First Deposit's operations) of Check 21 compliant checks to the Federal Reserve Bank. It would be further desirable to provide such a system and method incorporating means, such as a rules engine, to separate Automated Clearing House (ACH) eligible checks and use least cost routing to process them via ACH. That is, to provide such a rules engine which automatically processes, via Check 21, those checks that are not eligible for ACH, such as corporate checks, and those checks from merchants desirous of processing checks exclusively via Check 21 (i.e., a system that can automatically determine whether to process a check by ACH or Check 21). It would be of further benefit to provide such a system and method that enables similar processing of checks that are accompanied by, and associated with, payment coupons, such as mortgage payment and lease payment coupons, for example.